Real Estate Investor Magazine South Africa April 2018 - 100th Issue! | Page 21

DURBAN
A Second Coastal City
to Consider
BY MONIQUE DU TOIT
T
he darling of South African property has had a tough
couple of years. The Western Cape’s drought and a strug-
gling national economy means that many Cape Town
buyers might soon be shifting their focus to other cities. One
worthy candidate could very well be Durban.
Recently named the most liveable city in South Africa accord-
ing to Mercer’s 20th annual Quality of Living Ranking, placing
at number 89 worldwide, Durban is ahead of Cape Town (at 94)
and Johannesburg (95). In terms of the Middle East and African
region, Durban places fourth, with Dubai and Abu Dhabi nab-
bing the first two spots (at 74 and 77 respectively), Port Louis in
third place with a score of 83, and Cape Town at number five.
The report is considered an authoritative voice in the global
community, providing feedback to multinational corporations
on fair compensation for employees stationed in cities around
the world.
To come up with an accurate score, the ranking evaluates local
living standards according to 39 factor s, grouped in 10 categories:
Cape Town’s Day Zero may have been pushed out to 2019
for now, but the economy hasn't come off unscathed. According
to FNB’s figures, the Western Cape has seen exceptional house
price growth over the past five years of 50.4% to the end of De-
cember 2017, with KwaZulu-Natal trailing behind at 31.9%.
However, year-on-year growth in the last quarter of 2017 slowed
to 4.4%, down from 4.8% in the previous quarter and now sig-
nificantly slower than the 11.1% multi-year high of early 2016.
1. Political and social environment (political stability, crime, law
enforcement, etc.).
2. Economic environment (currency exchange regulations,
banking services).
3. Socio-cultural environment (media availability and censor-
ship, limitations on personal freedom).
4. Medical and health considerations (medical supplies and
services, infectious diseases, sewage, waste disposal, air pol-
lution, etc.).
5. Schools and education (standards and availability of inter-
national schools).
6. Public services and transportation (electricity, water, public
transportation, traffic congestion, etc.).
7. Recreation (restaurants, theatres, cinemas, sports and leisure,
etc.).
8. Consumer goods (availability of food/daily consumption
items, cars, etc.).
9. Housing (rental housing, household appliances, furniture,
maintenance services).
10. Natural environment (climate, record of natural disasters).
While the list is dominated by European cities, it is interest-
ing to note that developing economies are catching up, thanks to
years of investment into infrastructure and housing.
According to John Loos, property sector strategist at FNB,
slowing growth in the province isn’t surprising. Julia Hinton
from Property24 explains that the past 5 years of high growth
has lead to affordability challenges, compounded by the drought’s
impact on local economy.
The Second Mother City?
PayProp’s review of the rental market for 2017 shows KwaZu-
lu-Natal’s y/y growth coming in at 5.3%, slightly below the na-
tional average of 5.4%. Rent-to-income ratio for tenants in the
province is on-par with the national average of 27.9%, indicating
a tenant pool likely to be able to afford their rent.
We all know that these figures only tell a part of the story,
however. According to Andrew Schaefer, MD of Trafalgar, the
city is also home to many who need to be close to work in the city
centre, but cannot afford monthly rentals of between R4500 and
R8500. This problem, of course, is seen across the country. “This
has frequently given rise to uncontrolled sub-letting, overcrowd-
ing and all the accompanying social problems,” says Schaefer.
A growing trend in Durban is landlords converting their rent-
al apartments to provide separate rooms-to let, sharing kitchens,
bathrooms, and common rooms. “The property owners are able